Buoyant London house prices hit a new record high in May despite the impact of a rapid succession of interest rate rises.
The average cost of home in the capital was £526,183, up 8.2 per cent in a year and 0.2 per cent over the month.
Annual price growth in London remains strong, but the monthly figures show a far more modest rise of just 0.2 since the last data snapshot in April. By contrast, between March and April price growth was one per cent.
In London, the growth in house prices was led by the top of the market, with detached homes rising 11.1 per cent to reach £1,082,09, up from £973,866 in May 2021.
However this is a slight dip on April’s figures, which saw a 12.4 per cent rise in prices for detached properties.
The biggest rises were in Barking and Dagenham and Barnet, both up 11.4 per cent.
Richard Davies, managing director of London agents Chestertons, says: “With the Bank of England putting up interest rates more than once this year, many house hunters have also established a stronger sense of urgency to buy before further rate hikes.”
“Our branches receive enquiries from families, couples and investors but, particularly post-pandemic, we are seeing an uplift in the number of international students, international buyers as well as office workers who require a pied-à-terre closer to work.”
North London estate agent Jeremy Leaf said: “As we are finding at the sharp end, prices are continuing their upward path, despite the impact of 40-year high inflation and five successive interest rate rises.
“However, the continuing lack of choice, combined with a desire to take advantage of mortgage offers at super-low rates before they expire, have given the market added impetus.”
House prices in the UK
The capital still lags behind the rest of the UK, with the latest figures from the Land Registry revealing house prices continue to defy economic gloom, growing 12.8 per cent on last year.
Some experts had expected 40-year high inflation and five successive interest rate rises to lead to a slowdown, but the latest figures show the average UK property has reached a record high of £283,496, a £32,000 increase on last year.
In England, the South West was the region with the highest annual house price growth, with average prices increasing by 16.9 per cent in the year to May.
Stuart Law, CEO of the Assetz Group, said the monthly sold price data across the UK has “exceeded any expectations” of a housing market slowdown, as price growth continues to rise strongly.
“As we move into summer months, it is likely this growth will continue as housing purchases naturally increase at this time of year, inevitably pushing prices up further.”
Echoing this, Mike Scott, Chief Analyst at national estate agency Yopa said: “ There is as yet little sign in the figures of the widely expected slowdown in response to increases in interest rates and the cost of living, with the housing market proving to be surprisingly resilient.”
Scott said he expects the slowdown later in the year to be “quite modest”, with the market remaining active and prices continuing to rise at a slower rate.
According to Tomer Aboody, director of property lender MT Finance, the shortage of new properties is continuing to have an effect on prices. “With such low numbers of properties coming to the market, it’s not surprising prices continue to rise as buyers compete for limited stock.
“With interest rates rising, along with inflation and house prices, first-time buyers and movers are facing even tougher conditions with the market running away from them.” he said.
However Land Registry data is based on sold prices from May, and since then there have been some early signs the market could soon start to slow.
According to Propertymark, last month saw the first indications that high demand was easing across the UK, with some home sellers finding they had pitched their prices too high.
The company also said it had seen the return of seasonal trends and a slower summer season for the property market as “normality” crept back after the travel restrictions imposed by the pandemic.
Nathan Emerson CEO Propertymark said: “For the past two years agents have seen a relentless market which defied patterns that we as practitioners had become accustomed to.
“However, this summer is seeing seasonal trends return. This cooling down is allowing the number of homes available to buy to recover, and interestingly, a subtle but telling change is in the prices being achieved.”